Sweden’s krona soared to a four-month high against the euro after the Riksbank refrained from monetary easing to weaken the currency.
The krona rose as much as 0.9 percent versus the euro to 8.4918, its strongest level since Oct. 2, and traded at 8.5022 as of 11:33 a.m. in Stockholm. It gained as much as 1 percent against the dollar to 6.3031, its strongest since Feb. 4. The gains left the krona the best-performing major currency today against the euro, the dollar and the yen.
“While the Riksbank’s decision was not that surprising, we are still a bit surprised that the krona strength doesn’t seem to have any significance for the Riksbank,” Carl Hammer, chief currency strategist at SEB AB in Stockholm, said.
As finance ministers from the Group of 20 gather this weekend in Moscow, focus will be on the threat of international currency wars in a battle to boost trade competitiveness through weaker exchange rates. Swedish Finance Minister Anders Borg said last month that the Riksbank’s policy of not cutting rates further is propping up the krona and preventing the exchange rate from helping sustain a recovery.
The central bank left its repo rate unchanged today at 1 percent, a decision that was predicted by 13 of the 22 economists surveyed by Bloomberg. The rest forecast a cut to 0.75 percent.
Most forecasters estimate Sweden’s economy will recover this year as jobs growth boosts confidence that Europe has surfaced from the worst of its fiscal turmoil. The European Central Bank kept its benchmark rate unchanged last week at a record low of 0.75 percent, after euro-area economic confidence rose to a seven-month high in January, easing pressure on the bank to lower rates further.